The Government can afford the more targeted cost-of-living package announced yesterday, according to the chief economist at Davy, but supports should not become permanent and will need to be phased out.

Conall MacCoille said last year's surplus of €5 billion, as well as further expected growth this year, means the Government can afford the package of measures, "but I suppose the question is, should we be doing it?"

The advice from the IMF and the ECB is that economies should not try to chase inflation by putting more into the economy.

"If you are going to try and protect people from the cost of living pressures you should do it in a targeted way, so it was good to see a bit more of a targeted approach yesterday than in the Budget," Mr MacCoille said.

Wholesale natural gas prices are now down on pre-war levels.

In the UK, they directly regulate energy bills and people can be reasonably confident that energy bills will fall.

"In Ireland it's a lot less clear because of the way we regulate our market. It could well be the case, and the Taoiseach has made some comments that energy bills are going to fall quite rapidly in the next six months so the need for these kind of measures may not be there," the economist said.

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The Government extended the reduced 9% VAT rate for the hospitality sector for another six months, and the Temporary Business Energy Support Scheme has been extended until the end of May.

Mr MacCoille said, while these supports have been widely welcomed, they will need to be phased out.

"The danger will be that temporary one-off supports for sectors that are struggling will become permanent," he said.

"Of course there are firms that are struggling in these sectors that do deserve support through what's going to be a very difficult period, but at the same time, there will be firms that will be doing quite well," he said.

"I think this is why the Fiscal Advisory Council is saying really these supports, we don't want to make them permanent features, they should be phased out over a period of time. Ultimately in the long term we can't be providing subsidies to particular sectors over other sectors, that's inefficient for the economy," he stated.

"There is a case for this support to be extended but it does need to be phased out at some point," he added.